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Exporting AmericaWhy Corporate Greed Is Shipping American Jobs Overseas
By Lou Dobbs
Warner BooksCopyright © 2004 Lou Dobbs
All right reserved.
Chapter OneAssault on Middle-Class Americans
The twentieth century has been characterized by three developments of great political importance: the growth of democracy, the growth of corporate power, and the growth of corporate propaganda as a means of protecting corporate power against democracy. -ALEX CAREY
The odds are that during the past recession, you or someone you know was affected by corporate layoffs and the loss of a job. It's a painful experience, and one that can have a devastating effect on individuals and families. But in some cases, layoffs have affected entire towns, in effect crippling communities. And layoffs related to outsourcing have long-term effects on those communities, because companies pulling out take their taxes with them-that is, if they paid them at all. And the people in the town are also unable to pay taxes, because they're no longer getting paid to work.
These corporate pullouts run the gamut from manufacturing to high tech. The examples in the next few pages are just a few of the scenarios that are playing out with alarming regularity in communities all across America.
In Syracuse, New York, Carrier, the maker of air-conditioning and heating units, is closing two of its most productive and profitable factories and laying off 1,200 workers. Most of those jobs are headed to Singapore and Malaysia. It's too early for many of Carrier's employees to retire-the average worker at the plant is only forty-nine years old. In a move to save the jobs, New York State and the plant's union tried to dissuade Carrier from exporting the jobs to Asia by offering a $42 million incentive package. To no avail-the company is outsourcing these jobs.
With the closing of the Carrier plant, central New York State has now lost 10,000 jobs since 1990. Senator Hillary Clinton told me that she believes "Manufacturing is not a luxury. It's not an old-fashioned economic activity. It truly is core to much of what we need to do to maintain a strong economy and, I would argue, a strong national defense." Senator Clinton's assessment is close to that of Republican congressman Duncan Hunter, chairman of the House Armed Services Committee. A conservative Republican and a liberal Democrat in agreement on economic issues is a sign that the times, and Washington's policies, could be changing.
Syracuse may be better off than some cities in that it has an anchor industry: higher education. It's home to Syracuse University, and the city has worked hard to diversify its economy in the wake of plant closings by General Motors, General Electric, and Allied Signal. However, even with the anchor of Syracuse University, wage growth in the city has fallen below the national average as manufacturing jobs have left.
What's happening in Syracuse is no different from what is happening in many communities across America. From steel to appliances to automobiles, paying manufacturing jobs are being exported out of the country, leaving behind workers and communities struggling with how to recover.
The automobile industry is a prime example of a business in which ruthless pressure to cut costs has driven jobs abroad. And it affects jobs in many states. At Tower Automotive in Milwaukee, 500 employees used to make the frames for Dodge Ram pickup trucks. Now that work, and their jobs, are going to Mexico. The decision was made by DaimlerChrysler, which is squeezing its American suppliers by asking them to match the lower prices available from overseas manufacturers. All the automakers, not just Chrysler, claim they need these lower prices in order to keep making affordable cars and to keep market share.
Early this year, Ford closed its plant in Edison, New Jersey, after more than fifty-five years of producing cars and trucks there. A Ford spokesman said it would be too expensive to retool that plant so that it could produce different models. About 300 of the plant's 900 workers were relegated to early retirement, while others were transferred to Ford plants elsewhere in the country. Most important, at least 400 jobs were eliminated. Ford is, however, investing heavily in Asia and has set up a new regional headquarters in Thailand.
General Motors, long the symbol of Detroit's automotive might, has introduced a new Chevy, the Equinox. The Equinox is assembled in Canada with a Chinese-made engine. Now, the three most expensive parts of any automobile are the body, engine, and transmission. With the Equinox featuring a foreign-built engine, more than a third of the vehicle's cost is being transferred-and paid out-to China and not to American suppliers or workers. An interesting statistic: Employment in the U.S. auto industry has dropped by 200,000 jobs over the past four years. During that same time, imports of Chinese auto parts have doubled.
What makes all these examples so frustrating for American workers is that while Detroit throttles back at home and invests in Asia, foreign automakers, including Honda, Nissan, and Toyota, are investing in this market. In fact, as American automakers cut back, these Japanese companies are providing all the production growth in the United States. And calling our American automakers the Big Three is now a myth. Only two companies, Ford and GM, are American-based, while Chrysler is owned by German manufacturer DaimlerChrysler. To put a fine point on it, Toyota is selling more cars in the United States than Chrysler. And Toyota is now the second leading global car company, after General Motors.
We're not faring well in the auto business, and we're not faring well in the appliance business. Galesburg, Illinois, is the birthplace of poet Carl Sandburg and for many years was home to a large Maytag factory. In fact, Galesburg was a Maytag company town, and Maytag provided 1,600 jobs to local workers.
But Maytag decided to close its Galesburg factory and move much of the work to a new refrigerator manufacturing plant in Reynosa, Mexico. None of the American jobs are slated to be transferred-all 1,600 are scheduled to be laid off. Employees who made $15 an hour are being replaced by Mexican workers who earn less than $1 an hour. Maytag justifies the closing by citing competition from cheaper Asian refrigerators, and the tighter wallets of cost-conscious consumers.
With a current jobless rate of 9 percent, Galesburg will soon face a possible unemployment rate of 20 percent, along with a very uncertain future. People there can't turn to the government for help. After all, free trade agreements signed by the government promised workers at plants like this one a chance to export their products to new markets around the world. But the reality is, the only thing being exported from Galesburg is American jobs.
Clintwood, Virginia, has a population of 1,800. It's not a big town, but 250 of its best jobs are in the process of being outsourced to India. Online travel service Travelocity is shutting down its call center here. Workers at Travelocity made a starting wage of $8 an hour, plus training and benefits. But Travelocity lost $55 million last year and was looking to cut costs fast. It decided it could save $10 million by moving its Clintwood call center to India. Travelocity told CNN that "We made a difficult decision to outsource following significant losses last year. Our costs were significantly higher than our major competitors, who had chosen long ago to outsource to the Philippines, India, and elsewhere."
Travelocity is trying to give workers a soft landing by providing eleven months' notice, along with possible interviews at Travelocity's two remaining U.S. call centers. Clintwood, meanwhile, is going back to its roots, marketing one of the few things that can't be outsourced: tourism. Combined with local crafts and a mountain music museum dedicated to a local artist, Grammy Award winner Ralph Stanley, the town is attracting attention to itself. As a final note, the whole Travelocity episode was the second of two body blows to Clintwood. Just before Travelocity set up shop there, Nexus Communications had shut down a similar call center operation in the town.
The people of Celina, Tennessee, have experienced firsthand the cost of free trade. Twelve hundred people once worked in the town's OshKosh plant in Celina. Now only fifteen do. The rest of those jobs were sent out of the country, to Mexico and Honduras. Some of the company's employees had worked at OshKosh for three decades. But with OshKosh gone, the unemployment rate in Celina is 15.5 percent, and its per capita income has fallen to $13,000.
While Celina is just one more town abandoned by American companies in search of cheap foreign labor, the town is fighting to get back on its feet and stay there. Clay County has created a Web site to attract new business to Celina and the surrounding area, and the chamber of commerce is aggressively selling the county to outsiders. It has already been successful, having lured a commonly outsourced business to the town: a call center. Healthcare Management Resources has set up a new center to handle billing for hospitals and now employs 120 people. The jobs don't pay as much as the factory jobs at OshKosh, but it's steady work and it carries benefits. Moreover, the company is thrilled with Celina. According to Dennis Swartz, the president of Healthcare Management Resources, the people of Celina have a "great work ethic. I put these people up against anybody anywhere. And my goal in life is really to set up a third center, a fourth center, a fifth center in areas just like this."
Internet provider Earthlink is closing its call center in Harrisburg, Pennsylvania, and sending 400 jobs to the Philippines and India. The state of Pennsylvania has already been hard hit by job losses, having seen 132,000 manufacturing jobs evaporate. Now it's seeing its high-tech jobs go away. At a stop in Harrisburg in 2004, President Bush told Pennsylvanians that "There are people looking for work because jobs have gone overseas. And we need to act in this country. We need to act to make sure there are more jobs at home." So far, that has been nothing but an empty statement. And to worsen the pain, the Earthlink workers in Harrisburg have been denied special trade assistance by the Bush administration.
Outside of the obvious factory closings and new call centers in India, there are the insidious under-the-radar cases of outsourcing that we rarely ever detect. They eat away at our economic infrastructure like rot in a foundation, and we barely notice-until it's too late. For example, The Smithsonian Institution has chosen Innodata Isogen to create an online library of one of the most expansive research projects in American history, the United States Exploring Expedition. Running from 1838 to 1842, it was the first federally funded mission of exploration in U.S. history and yielded nearly 3,000 pages of data on topics including geology, anthropology, American art, and more. But Innodata Isogen outsourced the work to the Philippines. According to the Smithsonian, the work was sent overseas because there are not enough skilled workers in this country to do the job. I find it incredibly hard to believe that it required offshore talent to chronicle the legacy of one of America's greatest research endeavors.
Under-the-radar outsourcing affects small industries that have been the source of jobs in the United States for as long as most people can remember. The embroidery industry, one of the mainstays of the New Jersey economy for more than a century, is now in danger of disappearing from this country. Small New Jersey factories once made 90 percent of the embroidery in American lingerie, clothing, and bedding. It was a half-billion-dollar-a-year industry with nearly 7,000 jobs. Today, there are less than 1,000 jobs left. American clothing manufacturers still require embroidery on their products, but they've gone to Sri Lanka, India, China, and Mexico to get it done.
It's doubtful that anyone will claim that embroidery is a critical component of our national economy, yet it is a traditional craft that has provided a good income to thousands of Americans for generations. And there's still a lot of it being done-just not by Americans. It's one more part of apparel manufacturing that is being outsourced. Today, 96 percent of clothing production is done outside our borders. That fact had a direct bearing on last year's closing of thirty-seven textile factories in North and South Carolina alone.
And when it comes to apparel, even gaping loopholes in U.S. Customs inspections of clothing and textiles are costing American jobs. Less than one-tenth of one percent of the three million textile shipments that come into this country every year are inspected. That's a security gap that foreign textile manufacturers have been exploiting to their benefit and our detriment. Knowing that they are unlikely to get caught, unscrupulous producers will label a piece of clothing to read that it was made in, say, Honduras, when it may actually have come from China. Then it's shipped to the United States using falsified entry documents. According to a recent General Accounting Office report, the lack of inspection at our borders results in the frequent smuggling of garments past U.S. customs.
There's even more opportunity for abuse. U.S. Customs allows shippers to pass cargo through the United States, free of charge and free from quota restrictions, on its way to another country. But Customs does not track shipments adequately enough to ensure that they leave the United States. Many shipments get here, claim to be passing through, and are then diverted to store shelves in American cities and towns-without a penny in tariffs ever being paid. This kind of cheating makes it hard for American textile manufacturers to compete. It's not known how much is lost in tariff revenue from this kind of fraud and smuggling, but one case provides some stunning insight. In Long Beach, California, 5,000 containers were stopped and inspected. Customs agents found illegal merchandise. The exporter was trying to avoid paying $65 million in duties.
The final indignity is that these imports, both legal and illegal, are usually arriving on foreign-owned ships. Seven hundred fifty billion dollars' worth of goods comes into the United States on ships each year, but not one of the top ten international shipping companies is American-owned. Foreign companies have bought out nearly all the top American cargo carriers-a trend that has been facilitated by foreign governments that subsidize their international shipping companies. American firms sold out when they realized they couldn't compete against subsidized international shipping. Free trade or simply the absence of an American trade strategy?
These foreign ships are arriving in American port terminals that are increasingly under the control of foreign companies.
Excerpted from Exporting America by Lou Dobbs Copyright © 2004 by Lou Dobbs. Excerpted by permission.
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